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Services Marketing
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e
Chapter 5 – Page 1
Chapter 5:! Distributing Services! Through Physical !
!And Electronic Channels !
Services Marketing
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e
Chapter 5 – Page 2
Overview Of Chapter 5!
Distribution in a Services Context!
Options for Service Delivery!
Place and Time Decisions!
Delivering Services in Cyberspace!
The Role of Intermediaries!
The Challenge of Distribution in Large Domestic Markets!
Distributing Services Internationally!
Services Marketing
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e
Chapter 5 – Page 3
Distribution in a Services Context!
Services Marketing
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e
Chapter 5 – Page 4
Distribution in a Services Context!
In a services context, we often don’t move physical products!
Experiences, performances, and solutions are not being physically shipped and stored!
More and more informational transactions are conducted through electronic and not physical channels!
Services Marketing
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e
Chapter 5 – Page 5
Applying the Flow Model of Distribution to Services!
The three interrelated elements of distribution are:!
Information and promotion flow !! To get customer interested in buying the service!
Negotiation flow!! To sell the right to use a service!
Product flow!! To develop a network of local sites!
Services Marketing
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e
Chapter 5 – Page 6
Distinguishing between Distribution of Supplementary and Core Services!
Most core services require physical locations!
Many supplementary services are informational; can be distributed widely and cost-effectively via other means!! Telephone !! Internet!
Services Marketing
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e
Chapter 5 – Page 7
Information and Physical Processes of Augmented Service Products"
Services Marketing
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e
Chapter 5 – Page 8
Using Websites for Service Delivery!
Order-Taking!Make/confirm reservations"Submit applications"Order goods, check status "
Safekeeping!Track package movements"
Check repair status"CORE: Use Web to deliver information-based core services!
Core!
Consultation!Conduct e-mail dialog"Use expert systems"
Hospitality!Record preferences"
Billing!Receive bill"
Make auction bid"Check account status"
Exceptions!Make special requests"
Resolve problems"
Payment!Pay by bank card"
Direct debit"
Information!Read brochure/FAQ; get schedules/"
directions; check prices"
Services Marketing
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e
Chapter 5 – Page 9
Options for Service Delivery!
Services Marketing
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e
Chapter 5 – Page 10
Distribution Options for Serving Customers!
Customers visit service site!! Convenience of service factory locations and operational
schedules important when customer has to be physically present!
Service providers go to customers!! Unavoidable when object of service is immovable!! More expensive and time-consuming for service provider!
Service transaction is conducted remotely!! Achieved with help of logistics and telecommunications!
Services Marketing
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e
Chapter 5 – Page 11
Six Options For Service Delivery"
Services Marketing
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e
Chapter 5 – Page 12
Channel Preferences Vary Among Customers!
For complex and high-perceived risk services, people tend to rely on personal channels!
Individuals with greater confidence and knowledge about a service/channel tend to use impersonal and self-service channels!
Customers with social motives tend to use personal channels!
Convenience is a key driver of channel choice!
Services Marketing
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e
Chapter 5 – Page 13
Place and Time Decisions!
Services Marketing
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e
Chapter 5 – Page 14
Place Decisions of Service Delivery!
Cost, productivity, and access to labor are key determinants to locating a service facility!
Location constraints!! Operational requirement (e.g., airports)!! Geographic factor (e.g., ski resorts)!! Need for economies of scale (e.g., hospitals)!
Services Marketing
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e
Chapter 5 – Page 15
Place Decisions of Service Delivery!
Ministores!! Creating many small service factories to maximize geographic
coverage!! Separating front and back stages of operation!! Purchasing space from another provider in complementary field!
Locating in Multipurpose Facilities!! Proximity to where customers live or work!
- Service Stations!- Service Perspectives 5.2!
!
Services Marketing
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e
Chapter 5 – Page 16
Time of Service Delivery!
Traditionally, schedules were restricted!! Service availability limited to
daytime, 40-50 hours a week !
Today!! For flexible, responsive
service operations: 24/7 service, 24 hours a day, 7 days a week, all around the world!
Services Marketing
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e
Chapter 5 – Page 17
Delivering Services in Cyberspace!
Services Marketing
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e
Chapter 5 – Page 18
Service Delivery Innovations Facilitated by Technology!
Technological Innovations!! Development of “smart” mobile telephones and PDAs, and
presence of Wi-Fi!! Voice-recognition technology!! Websites !! Smart cards!
- Store detailed information about customer!- Act as electronic purse containing digital money!
Electronic channels can be offered together with physical channels, or replace physical channels!
Services Marketing
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e
Chapter 5 – Page 19
E-Commerce: Move to Cyberspace!
What are the factors that encourage you to use virtual stores? !! Convenience!! Ease of search!! Broader selection!! Potential for better prices!! 24-hour service with prompt delivery!
Services Marketing
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e
Chapter 5 – Page 20
E-Commerce: Move to Cyberspace!
Recent developments: websites, customer management (CRM) systems, and mobile telephony!
Integrating mobile devices into the service delivery infrastructure can be used as means to:!! Access services!! Alert customers to opportunities/problems!! Update information in real time!
Services Marketing
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e
Chapter 5 – Page 21
Role of Intermediaries!
Services Marketing
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e
Chapter 5 – Page 22
Splitting Responsibilities for Service Delivery!
Challenges for original supplier "� Act as guardian of overall process!� Ensure that each element offered by intermediaries fits overall service concept!
Services Marketing
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e
Chapter 5 – Page 23
Franchising !
Franchisor provides training, equipment, and support marketing activities. !
Franchisees invest time and finance, and follow copy and media guidelines of franchisor.!
Advantages: !! Expand delivery of effective service concept without a high level of
monetary investment!! Franchisees are motivated to ensure good customer service and
high-quality service operations!
Services Marketing
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e
Chapter 5 – Page 24
Franchising!
Disadvantages of franchising!! Loss of control over delivery system and how customers
experience actual service !! Effective quality control is difficult!! Conflict between franchisees may arise especially as they gain
experience!
Alternative: license another supplier to act on the original supplier’s behalf to deliver core product!! Trucking companies!! Banks selling insurance products!
Services Marketing
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e
Chapter 5 – Page 25
Challenge of Distribution in Large Domestic Markets!
Services Marketing
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e
Chapter 5 – Page 26
The Challenge of Distribution in Large Domestic Markets!
Distributing services (i.e., physical logistics) faces challenges due to:!! Distances involved !! Multiple time zones!! Multiculturalism!! Differences in laws and tax rates!
Services Marketing
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e
Chapter 5 – Page 27
Distributing Services Internationally!
Services Marketing
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e
Chapter 5 – Page 28
Factors Favoring Adoption of Transnational Strategies!
Transnational strategy involves integration of strategy formulation and its implementation across all countries in which company elects to do business!
Market Drivers!! Common customer needs across countries!
! Corporate customers seek to standardize and simplify suppliers used in different countries – ad agencies, logistics suppliers, Big 4 accounting firms!
Government Drivers!! Favorable trade policies, compatible technical standards, common
marketing regulations!
Services Marketing
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e
Chapter 5 – Page 29
Factors Favoring Adoption of Transnational Strategies!
Competition Drivers!! Competitors from overseas; interdependence of countries!
! Firms may be obliged to follow competitors into new markets to protect own positions elsewhere!
Technology Drivers!! Advances in information technology – miniaturization and mobility of
equipment, digitization of voice!
Cost Drivers!! Economies of scale!! Lower operating costs!
Services Marketing
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e
Chapter 5 – Page 30
How Service Processes Affect International Market Entry!
People processing services require direct contact with customers!! Export service concept!
- Acting alone or in partnership with local suppliers ! e.g., chain restaurants, hotels, car rental firms!
! Import customers!- Inviting customers from overseas to firm’s home country !
e.g., hospitals catering to “medical tourism”!
! Transport customers to new locations!- Passenger transportation (air, sea, rail, road)!
Services Marketing
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e
Chapter 5 – Page 31
How Service Processes Affect International Market Entry !
Possession processing involves services to customer’s physical possessions!
- Repair and maintenance, freight transport!
Information-based services include mental processing services and information processing services!! Export the service to a local service factory!
- Hollywood film shown around the world!
! Import customers!! Export the information via telecommunications and transform it
locally!- Data can be downloaded via CDs or DVDs!
Services Marketing
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e
Chapter 5 – Page 32
Impact of Globalization Drivers on Various Service Categories "
Globalization Drivers "
People Processing " Possession Processing "
Information Based "
Competition " Simultaneity of production and consumption limits leverage of foreign competitive advantage, but management systems can be globalized.!
Technology drives globalization of competitors with technical edge.!
Highly vulnerable to global dominance by competitors with monopoly or competitive advantage in information.!
Market " People differ economically and culturally, so needs for service and ability to pay may vary. !
Level of economic development impacts demand for services to individually owned goods. !
Demand for many services is derived to a significant degree from economic and educational levels. !
Services Marketing
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e
Chapter 5 – Page 33
Impact of Globalization Drivers on Various Service Categories"
Globalization Drivers !
People Processing " Possession Processing "
Information Based "
Technology " Use of IT for delivery of supplementary services may be a function of ownership and familiarity with technology.!
Need for technology- based service delivery systems depends on possessions requiring service and the cost trade-offs in labor substitution !
Ability to deliver core services through remote terminals may be a function of investment in computerization, etc. !
Cost " Variable labor rates may impact pricing in labor-sensitive services. !
Variable labor rates may favor low-cost locations.!
Major cost elements can be centralized and minor cost elements localized. !
Government " Social policies (e.g., health) vary widely and may affect labor cost, etc. !
Policies may decrease/increase cost and encourage/discourage certain activities !
Policies may impact demand and supply and distort pricing !
Services Marketing
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e
Chapter 5 – Page 34
Barriers to International Trade in Services!
Passage of free-trade legislation is important facilitator of transnational operations!! Notable developments: NAFTA, Latin American economic blocs,
EU!
Despite efforts of WTO and GATT, barriers still exist:!! Restrictions on international airline operating rights!! Heavy taxation!! Legal restrictions!! Lack of broadly agreed upon accounting standards!! Cultural issues!
Services Marketing
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e
Chapter 5 – Page 35
Summary!
Distribution relates to both core and supplementary services and embraces three interrelated elements!! Information and promotion flow, negotiation flow, product flow!
Channel options include:!! Customers visit the service site!! Service providers go to their customers!! Service transaction is conducted remotely!
Place and time decisions include where services should be delivered in bricks-and-mortar context, when it should be delivered !
Services Marketing
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e
Chapter 5 – Page 36
Summary!
Delivery in cyberspace is facilitated by technology; e-commerce allows 24-hour delivery, saving time and effort !
Intermediaries play roles in distributing services!
Service processes (people processing services, possession processing services, and information-based services) affect international market entry via the drivers: !! Market drivers!! Competition drivers!! Technology drivers!
! Cost drivers!! Government drivers!